The sense of prosperity is still affected by the war


The sense of prosperity is still affected by the war

According to the June 2022 survey of Századvég Konjunktúrakutató, the sense of prosperity of both the population and businesses has declined: on a scale between -100 and +100, the value of prosperity index decreased from -14.7 to -16.8 regarding households, while it decreased from -14.0 to -19.0 regarding businesses. The decline in the indicators is still caused by the uncertainty induced by the Russian-Ukrainian war and economic sanctions and by the higher volatility in the markets (foreign exchange, money, bond and commodity markets). The sense of prosperity is possible to improve when the war ends, the uncertainty in the energy markets is eliminated, and lower prices develop.

1. ábra

Compared to the value of last month, two of the sub-indices of the household prosperity index have declined, while two have improved. The most favourable is still the perception of the employment situation, the value of which has decreased from last month’s +4.4 to +2.9, but it still remains in positive values. Households have the most negative perception of the inflation processes, the sub-index of which has – slightly – improved from -83.6 to -82.5. The perception of the economic environment has changed from the value of -21.6 to -26.5, while that of the financial situation from -13.3 to -14.8.

2. ábra

The population is more pessimistic about the development of the economic situation over the past 12 months. The proportion of those who perceived a significant deterioration has increased from last month’s 36.0 percent to 39.1 percent, while that of those who experienced a moderate deterioration has increased from 24.5 percent to 27.4 percent. After 13.9 percent in June, 10.4 percent of the population assessed the economic situation as unchanged, while 15.5 percent expected a slight improvement (17.4 percent in June) and 6.3 percent a significant improvement (6.4 percent in the previous month).

Deterioration can also be observed in households’ assessment of their own savings situation over the next twelve months, which may be caused by the still high inflation prospects. While in June 17.8 percent said that they would save much less in the next twelve months than before, this proportion rose to 25.0 percent in July. Compared to last month (39.7 percent), almost 5 percentage points less, 34.8 percent predicted unchanged future savings. The biggest positive change is the decrease in the population’s credit portfolio, indicating the population’s financial awareness. In addition, compared to last month’s proportion (23.9 percent), a higher proportion of the population (25.9 percent) plans to spend more next year, because they are hopeful that the current unfavourable situation is only temporary.

3. ábra

Regarding the corporate survey, all four sub-indices have become more unfavourable compared to last month. The sub-index of the economic environment has fallen from -28.8 to -37.4, that of the sectoral environment from -8.9 to -18.5, that of the production environment from -9.0 to -12.2, while that of the business environment from -19.8 to -24.4.

4. ábra

Both the population and businesses have become more pessimistic about future economic processes, but the negative change in this forward-looking index for businesses is bigger (-6.5) than for households (-2.6).

There has been a significant negative change in the companies’ perception of the economic situation of the next twelve months, as 37.0 percent predicted a significant deterioration compared to 27.9 percent in June, and almost the same proportion, 34.0 percent predicted a small deterioration compared to 35.2 percent. After 14.9 percent in June, 12.0 percent predicted unchanged economic situation, while the proportion of those who expect a slight improvement has fallen from 13.5 percent to 11.0 percent and that of those who expect a significant improvement has fallen from 2.4 percent to 2.0 percent.

At the same time, there has been a slight improvement in the raising of the funds necessary for the development of enterprises. Instead of 17.2 percent, the proportion of companies that have no difficulty at all in raising the funds necessary for development is 18.0 percent, and that of those who have rather no difficulty, is 25.0 percent compared to 24.3 percent. Instead of 29.7 percent in June, 28.0 percent think that raising funds is rather difficult, while 24.0 percent think that it is absolutely difficult compared to 24.0 percent.


 

About the prosperity index

The task of the prosperity research conducted by the Századvég Konjunktúrakutató Zrt. is to provide decision makers and analysts with information about the current and expected processes of the economy in the near future. Our institute has been compiling corporate and household prosperity indices on a monthly basis since August 2019. In our monthly survey, we ask 1,000 company executives and 1,000 adult residents about their perception of the economic situation and their expectations thereof. Regarding the two groups, we ask 29 and 28 questions, respectively, which cover a wide range of economic life. Of the responses, positive ones (e.g., expected improvement in the economic situation) receive positive scores, while negative ones (expected decline in employment) receive negative scores. Then, by averaging the scores and converting them to a scale between -100 and +100, the prosperity indices are obtained. Thus, the higher the value of the prosperity indices, the more favourable households and companies perceive the processes in the economy. In addition, regarding both household and corporate surveys, we also prepare 4 sub-indices for each by using some of the questions, which illustrate the development of economic well-being in an area. 

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